How does the present economic turmoil affect imports from China?
By Klaus-Dieter Hanke
The good news for all importers is, there is no substitute to importing from China. Products at more economic prices have become part of our daily life. Most of these products are made in China and have replaced locally made products that could not compete with them for various reasons.
The bad news is that China as the so called “Factory of the World” is seriously affected by the lower demand of the main import countries like the USA and the EC member states.
To counter the effects of the global financial crises, China has announced a US$ 586 billion rescue package to finance programs in 10 major areas like rural infrastructure, social welfare, etc. The amount will be spent until 2010. Included in the rescue package is a reform of the VAT (Value Added Taxes) rebate system for 3,770 items, that will cut industry costs by estimated 120 billion Yuan.
Since oil prices, raw material prices, and labor costs are in the decline, regular price increases as in the past, should be out of question for the time being.
As a result of the global financial crisis, a large number of small and medium sized factories, already in difficulties before, were forced to close. Largely reduced order volumes from overseas customers and lack of funding from local banks have driven these factories into the corner with no way out.
The result may not necessarily be bad for importers because as always in difficult times, only the stronger and better organized factories will survive and they are usually the more trustworthy partners for importers.
Klaus-Dieter Hanke, Managing Director of WebMediaBiz.
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January 7th, 2009 at 12:29 am
I believe imports from China may be affected to some extent, but i foresee a situation where China manufacturers and exporters take an active role in exporting their products.
There is room for export marketing initiatives by firms within China.
January 20th, 2009 at 4:09 am
That will certainly be the case. Presently some of the larger manufacturing groups like for instance Haier have already become global players and this trend will continue.
Just think and compare with the development in Japan some decades ago.
January 21st, 2009 at 7:26 am
If there is to be a years-long, world-wide economic slowdown, won’t we expect to see less demand in China for automobiles and more demand in the United States for the simpler, less costly automobiles China is best positioned to manufacture? In light of that, are the Chinese manufacturers modifying their products and testing them to United States safety standards?
January 21st, 2009 at 4:57 pm
I can’t tell whether the Chinese manufacturers are modifying their products for the US market, but it is very likely since European importers tested the market (for instance in Germany) and relayed the information about the necessary modifications back to the manufacturers.
I guess that the same will have happenend in the United States.
Expect small, low priced and economic cars from China in near future.
January 27th, 2009 at 7:59 pm
China dominates in toy, shoes, clothing and consumer electronics. These are discretionary categories in the USA and Europe, therefore I see the downturn affecting China deeply. Recent production growth in home furnishings and housewares will also be very difficult to manage in China with home sales plummeting week after week in the rest of the world.
January 28th, 2009 at 3:01 pm
Robert Browning,
Toyota is closing planys in US and Japan and expanding their facilities in China to meet the demand, that is the answer.
February 1st, 2009 at 9:19 am
In the past China had always managed to increase the domestic consumption by encouraging factories to extend the closure period after the Chinese national holiday on the first of October.
Workers that did not have to work, used the extra time for shopping.
That may not work this year, because so many factories have closed and left their workers no other choice than to return to their home towns.
Without much money left, they may not be in the shopping mood.
Shifting production facilities from abroad to China may help but it usually takes considerable time to get a plant running.
Upgrading of products to make them more profitable is essential for survival. I know that from my experience dealing with electronic manufacturers in Southern China. They simply could not compete anymore with the factories in Northern China and were forced to upgrade or go under.
March 3rd, 2009 at 9:24 pm
China will learn the western world how easily they can find new playgrounds e.g. in green technology. By now they increase their measures in Photovoltaik (PV) and Lithium batteries not only for making the world a greener place. China will profit from the environmental awareness and supply solar power et cetera to affordable prices so that the customer will buy items produced in China – indirectly subsidized by Western governments through tax reduction or whatsoever for local buyers.